Cryptocurrency investment has gained significant popularity in recent years, offering individuals the potential for impressive returns. However, it’s crucial to consider the appropriate investment structure that aligns with your goals, risk tolerance, and legal obligations.
Here are five structures to consider when investing in cryptocurrency.
- Individual Ownership
Investing in cryptocurrency under your own name is the simplest and most straightforward approach. It allows for direct control and ownership of your assets, however, you need to be aware of tax implications and record-keeping requirements.
- Family Trust
A family trust offers asset protection, income distribution flexibility, and potential tax benefits. However, operating a family trust involves specific compliance obligations, such as maintaining accurate trust records and adhering to trustee responsibilities.
- Self-Managed Superannuation Fund (SMSF)
An SMSF can invest in cryptocurrencies with potential tax advantages, including concessional tax rates on investment earnings. However, SMSFs are subject to strict rules, such as investment restrictions, sole purpose tests, and annual audits, making professional advice essential to navigate this complex structure.
- Company Structure
Investing through a company provides legal ownership separation, limited liability protection, and potential tax advantages. By utilising a company structure, you can protect personal assets and potentially reduce personal tax obligations. However, it’s important to consider additional administrative requirements, such as maintaining company records, conducting regular audits, and fulfilling reporting obligations.
- Partnership or Joint Venture
Pooling resources and sharing risks and rewards through a partnership or joint venture can be an attractive option for collaborative investment strategies. This structure allows for shared decision-making and combined capital, potentially mitigating individual risks. However, clear and comprehensive agreements that define ownership percentages, profit-sharing arrangements, and responsibilities are crucial to avoid disputes.
Investing in cryptocurrency requires careful consideration of the appropriate investment structure that suits your unique circumstances and objectives. Whether you opt for individual ownership, a family trust, an SMSF, a company structure, or a partnership/joint venture, it’s essential to be aware of the benefits, compliance obligations, and potential tax implications associated with each structure.
Seeking professional advice from accountants, financial advisors, or legal experts specialising in cryptocurrency investments will provide invaluable guidance and help you make informed decisions in relation to your investments. APS Tax now offers tailored cryptocurrency support to help you navigate the complexities associated with tax and make informed financial decisions.
Written by APS Senior Accountant, Stephen Fry.
Stephen is an accountant with over 13 years of professional expertise in the areas of taxation and accounting. Currently serving as a senior tax accountant at APS Tax, Stephen offers comprehensive guidance and ensures compliance in all tax-related matters. He has developed a specialised focus in areas such as self-managed superannuation funds, cryptocurrency taxation and leveraging software and technology to assist clients to streamline their processes. Beyond his professional pursuits, Stephen cherishes quality time with his family and enjoys unwinding on the golf course. On the weekends he also enjoys following the AFL and watching British comedy television.